Illinois to Online, Out-of-State Shoppers: Pay Up
Illinois tax collectors have a message for residents who skirt sales taxes online and out of state: Start paying up.
The cash-strapped state will step up enforcement this year of the decades-old "use tax," which applies to many items bought online or in another state. Officials have added reminders on this year's paper and online tax forms about the tax.
The state has made a recent push to collect sales taxes from retailers like Amazon.com Inc. and Overstock.com Inc., approving a law this month that led both companies to drop affiliates in the state.
But Susan Hofer, a spokeswoman for the Illinois Department of Revenue, says auditors will target "big ticket" purchases, like boats sold in Florida, over smaller purchases online.
"If you go online and buy a book on Amazon, it's your conscience that you have to live with," Hofer said.
The tax applies to any purchases made with a sales tax rate lower than Illinois' 6.25 percent, to protect in-state retailers that charge the tax.
For shoppers who didn't keep their receipts, the state has published a list of suggested "use tax" amounts based on income: $15 for people who made $20,000 last year, $27 for people making $50,000, and $52 for people making $100,000.
That's not including taxes on major purchases like boats or cars.
Residents can also pay back taxes on purchases as far back as 2004, thanks to state law passed last year.
The revenue department estimates that Internet shopping could have generated $153 million last year if online retailers were taxed at the state rate. Illinois lawmakers have tried to collect from Amazon and others, which say they shouldn't pay taxes in the state because they don't have offices there.
Gov. Pat Quinn signed a bill this month that charges sales taxes on online purchases made through Illinois affiliates of online companies. That led to Amazon announcing it would end its relationships with state affiliates.
Hofer acknowledged the difficulty revenue auditors face with online shopping.
"How would I or one of our enforcers know if you went home every night and spent five hours shopping on Amazon?" she said.
The state won't have statistics on how many residents will pay until the end of tax season, Hofer said. But interviews with accountants suggest most people either haven't made untaxed purchases or aren't reporting them.
"I've had one client out of 300 volunteer to pay it," said Julie Herwitt, a Chicago accountant. She said she believes most of her clients don't know the tax exists.
At the Bird Armour LLC accounting firm in Springfield, fewer than 5 percent of the 350 returns finished so far have made "use tax" payments, managing member Michael K. Armour said.
"I must admit that I am surprised at the number of people that have come forward," he said.
Last year, the state collected an estimated $4 million to $6 million from the tax. The department hopes that will double this year, Hofer said.
"We expect that people will pay what they owe, recognizing this is part of their responsibility as a citizen," she said.
(Photo courtesy of Rob Lee/Flickr)